To prepare for a franchise resale, owners should organize their financial records, reduce the business’s dependence on their day-to-day involvement, and understand the franchisor’s transfer requirements. In a recent article for 1851 Franchise, JT Tatem, President of Transworld Business Advisors®, recommends beginning the preparation process 12 to 24 months before a planned sale.
Starting early gives owners time to strengthen the business, address potential concerns, and make the transition easier for a future buyer.
Present Clear Financial Records
Financial clarity is one of the most important parts of franchise resale preparation.
Owners should identify personal or discretionary expenses running through the business and prepare financial statements that clearly reflect ongoing operations. A normalized profit and loss statement adjusts financials to provide a clearer picture of recurring business performance, while seller’s discretionary earnings, or SDE, helps illustrate the financial benefit the business generates for an owner.
As Tatem puts it: “The cleaner, the better.” Organized, understandable records can make it easier for prospective buyers to evaluate the business and move confidently through due diligence.
Reduce Owner Dependence
A business that depends entirely on its current owner can be more difficult to transfer.
Documenting procedures, delegating important responsibilities, and developing employees who can manage key functions help demonstrate that operations can continue after the sale. For franchise owners, this means building a business that can function successfully without requiring their constant involvement.
Review Transfer Requirements
Franchise resales also involve requirements that may not apply to an independent business sale.
Before listing, owners should review their franchise agreement and Franchise Disclosure Document (FDD) to understand buyer qualifications, franchisor approval requirements, required training, transfer fees, and other conditions associated with transferring ownership.
Preparing for these requirements early can help prevent unexpected delays once a buyer is identified.
A successful franchise resale begins well before the business reaches the market. By strengthening financial records, reducing owner dependence, and understanding the transfer process, franchise owners can enter the sale process better prepared for the next stage of ownership.
This article was originally published in 1851 Franchise.